Three essays on nonwage compensation
Johnson, Matthew Slater
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An employment relationship consists of many dimensions other than monetary compensation. Textbook economic theory implies employers and employees will agree upon an efficient level of such nonwage compensation based on an employee's preferences and the employer's cost. At the same time, most types of nonwage compensation are set in a context of substantial regulation, legal restrictions, and other interventions. This dissertation investigates how regulatory intervention and other changes to the external environment affect firms' decisions regarding two types of nonwage compensation: workplace safety and employment mobility. Chapter One investigates how media coverage of employers caught violating workplace safety and health regulations affects future compliance. Using quasi-random variation in media coverage induced by a policy change at the Occupational Safety and Health Administration (OSHA), I find coverage about one employer leads to significantly higher compliance among other employers likely exposed to it. The results are most consistent with employers acting defensively to avoid their own future publicity. This work contributes to a growing literature investigating how providing information to stakeholders about sellers' quality leads to quality improvements. Chapter Two examines how workplaces respond to health and safety regulatory enforcement inspections. We first analyze the effects of randomized inspections on safety and business outcomes of inspected workplaces. We find inspections lead to significantly fewer injuries and have no detectable effect on business outcomes. We then attempt to identify the types of workplaces where inspections are more or less effective. Chapter Three investigates why employers have employees sign non-compete agreements (NCAs), which contractually limit where the employee can work in the event of a job separation. NCAs may solve hold-up problems that limit incentives to invest in transferable assets (e.g. general human capital). At the same time, NCAs may impose large costs on employees who sign them. We develop a model of how labor market conditions and liquidity constraints can jointly determine the decision to include an NCA in a hiring contract. We find strong support for the model's predictions using a survey we conducted among employers in the high-end hair salon industry, one in which NCAs are a large and growing phenomenon.